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EU Forecasts 'Recession of Historic Proportions' This Year

European Commissioner for the Economy Paolo Gentiloni speaks during a media conference on the economy at EU headquarters in Brussels, May 6, 2020.

The European Union predicted Wednesday that the 27-nation bloc would plunge into “a recession of historical proportions this year” because of the damage the coronavirus pandemic has inflicted on its economy.

In its first official projections, the EU said its economy is expected to shrink by 7.5% this year before rebounding by about 6% in 2021.

“It is now quite clear that the EU has entered the deepest economic recession in its history," EU Economy Commissioner Paolo Gentiloni said during a news conference in Brussels. Gentiloni said the coronavirus caused economic activity in the EU to decline “by around one third practically overnight.”

The coronavirus outbreak has hurt nearly all economic sectors, consumer spending and investment, triggering a sharp spike in the unemployment rate. The EU predicted the jobless rate will increase from 6.7% in 2019 to 9% this year before declining to about 8% in 2021.

Hardest hit

The commission predicted that Italy and Spain, two of the hardest-hit European countries, will be among the economies that will suffer most.

France's economy is also expected to weaken significantly but to a lesser extent, while Germany’s is projected to shrink more moderately and recover more quickly. Nevertheless, Germany is set to experience its most severe recession since World War II, as exports drop substantially.

Gentiloni said the severity of the recession and the strength of recovery in the EU will be inconsistent. He said recovery will depend largely on “the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources.” The damage, Gentiloni said, “can be mitigated through decisive, joint European action.”

Slowly reopening

As the spread of the coronavirus slows in Europe, people are carefully coming out of confinement, but stringent measures remain in place amid concern of a second wave of outbreaks.

The coronavirus has infected more than 1.1 million people in Europe and claimed the lives of more than 137,000 others, according to the European Center for Disease Prevention and Control.